How much will it cost me to buy a home?
Great question. Here are the upfront costs to expect when you purchase a home:
- Down payment: This is the portion of the purchase price you agree to cover.
- Third-party fees: These are fees paid to third parties, not Better. These services are required to get a purchase loan no matter which lender you use and we don't mark up the prices. Some of those fees may be paid by the seller. Examples include the appraisal fee, title insurance, and transfer taxes.
- Escrow deposit: If you choose to pay for your homeowner's insurance and taxes as part of your monthly loan payments, you will need to pay an initial deposit so the account can cover future payments. The number of months required will depend on when these items are due for payment relative to your closing date.
- Pre-paid interest: This is a one-time upfront interest payment due at closing. It covers interest from the day of closing through the end of the month.
- (optional) Loan points: We allow you to get a lower interest rate by paying points.
When will I need to pay these costs?
After your offer is accepted and you sign a purchase agreement, you will pay an earnest money deposit. This shows the seller you are serious about the transaction and typically ranges from 1-2% of the purchase price. This deposit will be applied toward your down payment.
At closing, you will be expected to pay for all remaining costs, including the down payment, third-party fees, and pre-paid costs.
Which third-party fees will I be charged?
Here are the third-party fees associated with a home purchase loan. This does not include other costs that might be negotiated into your purchase contract (ex: pest inspection fee).
- Appraisal fee: A home appraisal must be done by a licensed appraiser to determine the value of the property. You will get a copy of the final report.
- Credit report: We need to check your credit in order to determine your creditworthiness and monthly debt obligations.
- Flood certification: We need to determine if your property is in a flood zone to ensure appropriate insurance coverage is in place.
- Lender's title insurance: This fee ensures we're protected if someone later makes a claim against the title of the property.
- Other title fees: You will see several miscellaneous title fees. These are charged by the title company for things such as document processing and paying the notary.
- Real estate transfer taxes: Local and state governments charge a transfer tax when real-estate is sold.</li><li>Recording fees: A fee charged by your city or county to officially record the sale.
- Settlement: This fee is paid to the settlement or escrow agent for coordinating the handling and disbursement of funds between the buyer and seller.
- (optional) Owner's title insurance: This is an optional fee. It ensures you are protected if someone later makes a claim against the title of the property.
Which third-party fees does the seller pay?
Regional customs and laws typically determine who pays for what in a home purchase transaction. The seller might pay some of the third-party fees, like the transfer taxes or settlement costs, for instance. Consult your real estate agent to determine which party is responsible for each cost throughout the mortgage process.